What you should know about superannuation benefits

What you should know about superannuation benefits

Super benefits are meant to be a source of income after you retire, which often happens at about 65. For this reason, Aussies aged 65 or over can access their super benefits without needing to meet special conditions. 

For people a few years younger, the Australian Taxation Office (ATO) also specifies what’s called a ‘preservation age’, ranging between 55 and 60 years, after which you may access your super benefits whether or not you’ve retired. Accordingly, super funds may offer ‘preserved benefits’, which can be accessed only after a person reaches their preservation age. 

People with a disability, a health condition or those out of work can sometimes access their super benefits early as well. Super funds will have a set of conditions that people must meet before early access is granted and it’s best to contact the fund directly if you’re wondering about whether you qualify. 

In exceptional circumstances, the ATO may also allow super fund members to withdraw a portion of their benefits. For instance, Aussies, who faced financial difficulties due to Covid-19, were allowed to withdraw up to $10,000 from their super fund. 

Are superannuation benefits available for those over 55 years of age?

People born before 1 July 1960 may be able to access their preserved superannuation benefits at age 55, without retiring from their job. This involves setting up a transition-to-retirement income stream. Super benefits usually can’t be withdrawn as a lump sum payment until age 65. Keep in mind that the preservation age, set by the ATO, increases by one year for every year between 1960 and 1964. For those born after 30 June 1964, the preservation age is 60. 

The ATO allows someone changing jobs at or after the age of 60 can withdraw the super benefits they’ve built up to that point. In this situation, the change in employment is the release condition. While they may receive more super benefits from the next job, these cannot be accessed until another release condition, such as retirement or turning 65, is triggered. 

Anyone over the age of 65 can withdraw their super benefits without the same restrictions. They can also take out their entire super balance lump sum or they can choose to receive it as an income stream, in regular fortnightly or monthly payments.

What are defined benefit superannuation funds?

Typically, most Aussies accumulate super benefits over time which are eventually withdrawn when the release conditions are met. However, some super funds may allow members to opt for receiving what’s referred to as ‘defined benefits’ which essentially means the member receives a set amount that doesn’t change with market fluctuations. These super funds calculate the amount you can withdraw using a formula that accounts for the member’s and their employer’s contributions, the number of years the member was employed, and the member’s most recent earnings. However, defined benefit schemes aren’t as common as they once were. 

If your super fund offers defined benefits and you wish to withdraw your super benefits, you should consult a financial advisor or speak to the fund. Remember that you can only withdraw super benefits from a defined benefit superannuation fund after receiving a statement confirming your eligibility. This statement will also tell you whether some or all of your super benefits are taxable and the amount of tax payable or withheld. 

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Learn more about superannuation

How do you create a superannuation account?

Before you create a superannuation account, you’ll need to check if you’re allowed to choose your own fund. Most Australians can, but this option doesn’t apply to some workers who are covered by industrial agreements or who are members of defined benefits funds.

Assuming you are able to choose your own fund, the next step should be research, because there are more than 200 different superannuation funds in Australia.

Once you’ve decided on your preferred superannuation fund, head to that provider’s website, where you should be able to fill in an online application or download the appropriate forms. You’ll need your tax file number (assuming you don’t want to be charged a higher tax rate), your contact details and your employer’s details (if you’re employed).

How do you access superannuation?

Accessing your superannuation is a simple administrative procedure – you just ask your fund to pay it. You can access your superannuation in three different ways:

  • Lump sum
  • Account-based pension
  • Part lump sum and part account-based pension

However, please note that your superannuation fund will only be able to make a payout if you meet the ‘conditions of release’. The conditions of release say you can claim your super when you reach:

  • Age 65
  • Your ‘preservation age’ and retire
  • Your preservation age and begin a ‘transition to retirement’ while still working

The preservation age has six different categories:

Date of birth Preservation age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
From 1 July 1964 60

There are also seven special circumstances under which you can claim your superannuation:

  • Compassionate grounds
  • Severe financial hardship
  • Temporary incapacity
  • Permanent incapacity
  • Superannuation inheritance
  • Superannuation balance under $200
  • Temporary resident departing Australia

How long after divorce can you claim superannuation?

You or your partner could be forced to surrender part of your superannuation if you divorce, just like with other assets.

You can file a claim for division of property – including superannuation – as soon as you divorce. However, the claim has to be filed within one year of the divorce.

Your superannuation could be affected even if you’re in a de facto relationship – that is, living together as a couple without being officially married.

In that case, the claim has to be filed within two years of the date of separation.

Either way, the first thing to consider is whether you’re a member of a standard, APRA-regulated superannuation fund or if you’re a member of a self-managed superannuation fund (SMSF), because different rules apply.

Standard superannuation funds

If your relationship breaks down, your superannuation savings might be divided by court order or by agreement.

The rules of the superannuation fund will dictate whether this transfer happens immediately, or in the future when the person who has to make the transfer is allowed to access the rest of their superannuation (i.e. at or near retirement).

Click here for more information.

SMSFs

If your relationship breaks down, you must continue to observe the trust deed of your SMSF.

So if you and your partner are both members of the same SMSF, neither party is allowed to use the fund to inflict ‘punishment’ – such as by excluding the other party from the decision-making process or refusing their request to roll their money into another superannuation fund.

This no-punishment rule applies even if the two parties are involved in legal proceedings.

Click here for more information.

Financial consequences

Superannuation funds often charge a fee for splitting accounts after a relationship breakdown.

Splitting superannuation can also impact the size of your total super balance and how your super is taxed.

Click here for more information.

What happens to my superannuation when I change jobs?

You can keep your superannuation fund for as long as you like, so nothing happens when you change jobs. Please note that some superannuation funds have special features for people who work with certain employers, so these features may no longer be available if you change jobs.

What are the age pension's age rules?

Australians must be aged at least 65 years and 6 months to access the age pension. This eligibility age is scheduled to increase according to the following schedule:

Date Eligibility age
1 July 2019 66 years
1 July 2021 66 years and 6 months
1 July 2023 67 years

How do I choose the right superannuation fund?

Different superannuation funds charge different fees, offer different insurances, offer different investment options and have different performance histories.

So you need to ask yourself these four questions when comparing superannuation funds:

  • How many fees would I have to pay and what would they cost?
  • What insurances are available and how much would they cost?
  • What investment options does it offer? How would they match my risk profile and financial needs?
  • How have these investment options performed historically?

How much money do you get on the age pension?

Pension payments can be reduced due to the income test and asset test (see ‘What is the age pension’s income test?’ and ‘What is the age pension’s assets test?’).

Here are the maximum fortnightly payments:

Category

Single

Couple each

Couple combined

Couple apart due to ill health

Maximum basic rate

$808.30

$609.30

$1,218.60

$808.30

Maximum pension supplement

$65.90

$49.70

$99.40

$65.90

Energy supplement

$14.10

$10.60

$21.20

$14.10

TOTAL

$888.30

$669.60

$1,339.20

$888.30

What fees do superannuation funds charge?

Superannuation funds can charge a range of fees, including:

  • Activity-based fees – for specific, irregular services, such as splitting an account after a divorce
  • Administration fees – to cover the cost of managing your account
  • Advice fees – for personal investment advice
  • Buy/sell spread fees – when you make contributions, switches and withdrawals
  • Exit fees – when you close your account
  • Investment fees – to cover the cost of managing your investments
  • Switching fees – when you choose a new investment option within the same fund

How do you claim superannuation?

There are three different ways you can claim your superannuation:

  • Lump sum
  • Account-based pension
  • Part lump sum and part account-based pension

Two rules apply if you choose to receive an account-based pension, or income stream:

  • You must receive payments at least once per year
  • You must withdraw a minimum amount per year
    • Age 55-64 = 4%
    • Age 65-74 = 5%
    • Age 75-79 = 6%
    • Age 80-84 = 7%
    • Age 85-89 = 9%
    • Age 90-94 = 11%
    • Age 95+ = 14%

If you want to work out how long your account-based pension might last, click here to access ASIC’s account-based pension calculator.

How many superannuation funds are there?

There are more than 200 different superannuation funds.

Is superannuation paid on unused annual leave?

If your employment is terminated, superannuation will not be paid on unused annual leave.

What compliance obligations does an SMSF have?

SMSFs must maintain comprehensive records and submit to annual audits.

How do I change my superannuation fund?

Changing superannuation funds is a common and straightforward process. You can do it through your MyGov account or by filling out a rollover form and sending it to your new fund. You’ll also have to provide proof of identity.

Can my employer use money from my superannuation account?

No, your employer can’t touch the money that is paid into your superannuation account.